Correlation Between China Foods and Coca Cola

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Can any of the company-specific risk be diversified away by investing in both China Foods and Coca Cola at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Foods and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Foods and Coca-Cola, you can compare the effects of market volatilities on China Foods and Coca Cola and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Foods with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Foods and Coca Cola.

Diversification Opportunities for China Foods and Coca Cola

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between China and Coca Cola is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Foods and Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola and China Foods is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Foods are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca-Cola has no effect on the direction of China Foods i.e., China Foods and Coca Cola go up and down completely randomly.

Pair Corralation between China Foods and Coca Cola

Assuming the 90 days horizon China Foods is expected to generate 1.85 times more return on investment than Coca Cola. However, China Foods is 1.85 times more volatile than Coca-Cola. It trades about 0.07 of its potential returns per unit of risk. Coca-Cola is currently generating about 0.0 per unit of risk. If you would invest  685.00  in China Foods on April 1, 2022 and sell it today you would earn a total of  46.00  from holding China Foods or generate 6.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.62%
ValuesDaily Returns

China Foods  vs.  Coca-Cola

 Performance (%) 
      Timeline 
China Foods 
China Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in China Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical indicators, China Foods may actually be approaching a critical reversion point that can send shares even higher in July 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0437
Payout Ratio
0.42
Forward Annual Dividend Rate
0.32
Dividend Date
2022-07-25
Ex Dividend Date
2022-06-13

China Price Channel

Coca-Cola 
Coca Cola Performance
0 of 100
Over the last 90 days Coca-Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Coca Cola Price Channel

China Foods and Coca Cola Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with China Foods and Coca Cola

The main advantage of trading using opposite China Foods and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Foods position performs unexpectedly, Coca Cola can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Coca Cola will offset losses from the drop in Coca Cola's long position.
The idea behind China Foods and Coca-Cola pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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